palantir

akimon · Post by **akimon** » Wed May 11, 2016 11:07 am

Inside Palantir, Silicon Valley’s Most Secretive Company

Perhaps the 3rd party data analytics bubble may start to burst?

I think in the future, companies will increasingly perform data analytics in-house, using open-source technologies and published algorithms.

Kitno · Post by **Kitno** » Wed May 11, 2016 11:48 am

1. Their burn rate is jaw-dropping. I don't think I've ever seen one that high (for their stage of development) if Wikipedia is to believed. They've been raising a few hundred million or 'units' each year since 2011. Each raise has sought a higher valuation. I separately read they had an estimated $250MM of revenues in 2011.

2. "On April 22, in an extraordinary move for a company that had prided itself on paying salaries below market rate, Palantir CEO Alex Karp announced a 20% pay raise for all employees who had worked there for at least 18 months. Karp also canceled annual performance reviews, saying the current system wasn’t working."

This is start-up 101. You can pay sub-market for a while with equity upside. As soon as you face a downround and consequent dilution you start seeing staff leave and it's a vicious circle.

Suspending appraisals and a 20% payrise is a sign of management desperation. You suspend appraisals because employee targets are not being met - unattainable targets are the first warning of bad management.

High burn rate, failed targets and management weakness - downround incoming. The article mentions high profile client losses. Well that again points to potentially a great product, but it's not delivering what those clients want.

At the end of the day they have a government client backstop but it aint at a unicorn valuation...

NIP247 · Post by **NIP247** » Wed May 11, 2016 12:26 pm

Additionally, I've always been wary of business models based on software AND consulting, you generally end up Neither, Nor...

Maggette · Post by **Maggette** » Wed May 11, 2016 1:33 pm

IMHO the "software + consulting services" problems appear in cases where software pretends to do stuff that can't be done that easily.

For example the ESB/ bussiness integration stuff. They sell you a software solution...and on the first day they show up withh 100 consultants and 150 developers to actually get their software to work in your specific case.

Any software that pretends to reduce solving complex bussiness and software problems (and analytics is complex) to a simple drag and drop GUI more often than not won't deliver.

Another example of this IMO is this one

https://www.talend.com/products/big-data

akimon · Post by **akimon** » Wed May 11, 2016 1:48 pm

Any software that pretends to reduce solving complex business and software problems (and analytics is complex) to a simple drag and drop GUI more often than not won't deliver.

Unless it is offered by Google. Wink

Kitno · Post by **Kitno** » Wed May 11, 2016 1:59 pm

Akimon I was just thinking the same as you posted that. As tech companies go Google is my favourite through their continued innovation and execution. Apple for example on the other hand is mostly focused on ergonomics and 'packaging' which is fine as a sale conduit but less intellectually impressive.

I especially the Google VC maxim: it's worth investigating (potential investment) if people use it at least twice a day.

jslade · Post by **jslade** » Thu May 12, 2016 5:08 am

I don't think anything that has happened to Palantir recently is any different from things that have happened to them over their history. Their burn rate has always been bad, and customers do come and go.

The pay raise; long time coming. DS in the valley is paying absurdly more than Palantir is.

That said, it's a consulting company valued at software company prices. Silly.

Nonius · Post by **Nonius** » Thu May 12, 2016 10:42 am

You guys see that DataMinr was dropped by Twitter as a partner. From my perspective, I'm not sure I'd advertise to the world that the intelligence agencies are my clients.

Kitno · Post by **Kitno** » Thu May 12, 2016 12:07 pm

jslade, about their high burn and payrise/appraisal suspension it points to a common theme seen in 'start-ups'. The necessary entrepreneurial management for product development, build-out and rapid growth is often unable to successfully morph into an established player management. Private Equity will often replace management a few years before IPO, or earlier, for this reason.

The CEO is noted in that article as saying they don't want to IPO because it's not right for his business - too true. The kind of funding they have from ultimately UHNW angels has negated the strictures of PE management scrutiny yet these investors will be asking for improved metrics and EBIT - it's been 12 years since incorporation. The response to employees shows they need to change their management style for their development cycle.

ast4 · Post by **ast4** » Thu May 12, 2016 2:47 pm

I grew up with one of the co-founders of palantir as well as a few people in senior management who they ended up bringing on board. All pretty smart guys.

Akimon, in regards to companies taking things in-house, I think you may be over estimating 1) the ability of the general talent and 2) management/hr's ability to recruit candidates who are actually talented. Running a scaled data analytics/ml operation/team is non-trivial IMO - generally you need to find people who can not only do the math, but actually understand how computers work.

Here's an example of what I'm talking about, a friend of mine who works for a certain tech company was complaining to me about the abysmal state of their "data scientists". Apparently these guys are storing all of their data in CSV format which takes hours to parse. That team's solution? Obviously the most reasonable one... fire up X instances using EC2 to speed up the process. This type of nonsense ends up eating into the bottom line obviously, but beyond that these guys don't even seem to understand how to solve a problem without brute force.

/rant

All this being said, I haven't really kept up with the palantir guys. Last time I checked their biggest client was the US gov't which seems like it should be fairly sticky money. They also attempted to launch a financial product which seemed to fail miserably.